When to Withdraw from an Annuity - Options for Retirement Income from an Annuity
When to Withdrawal from an Annuity
Annuities are used to help savers defer interest on their savings while they are still accumulating assets, and then designed to eventually begin paying a fixed monthly payment for your lifetime.
If you have been saving in an annuity and are nearing retirement, you have a decision to make about how to withdrawal money from your annuity in retirement.
The first thing you should ask yourself is how much fixed income you need in retirement. This is any regular fixed amount you receive, like Social Security, a pension, or payments from an annuity.
We can help you answer that question, or you may just desire a certain amount of fixed income to cover basic living expenses.
If you need additional fixed income to feel comfortable in retirement, an annuity can be a good way to get that. You can simply annuitize your annuity or exchange your current annuity into one that offers better payments. Annuitizing means you lose access to the money you have saved, in exchange for regular monthly payments going forward.
However, that’s not the best solution for everyone. You may want to consider other ways to get money out of an annuity besides annuitizing. This can help you save you on fees and taxes, and give you more flexibility in retirement to spend your money as needed.
Most annuities will allow a certain percentage of the account to be withdrawn each year. However, you need to be sure you have the details of your annuity to know the rules that are specific to your contract. There are different types of annuities, qualified or non-qualified that have very different tax consequences for withdrawals, some have added surrender fees, and if you are under age 59.5 there may be tax penalties for early withdrawals.
Using these options, while navigating around any penalties or fees, can help you better meet your goals and give you a more tax efficient way to pay for your retirement.
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